January 19, 2021
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A Blurred Distinction Between Traditional Maritime States And Open Registries

Credit: Marine Insight Credit: Marine Insight Marine Insight

By Gola Traub

This succinct article, along with subsequent ones, attempts to trace the genesis of open registry shipping. It also endeavours to show how the earlier open registry flag states (i.e., Panama and Liberia) crafted an alternative to traditional shipping, struggled with it and eventually turned it into the paragon – the very epitome of modern quality shipping.

Unlike a traditional (closed) registry ship, an open registry vessel is perhaps the most globalized merchant ship, for as it plies across oceans, it is generally manned by an international crew, managed by a multinational company, flagged under one country, and insured in another.

It must be said that the coexistence of these two-opposing shipping -business models (closed and open registries) has never been particularly smooth.

At the inception of the open registry in the mid-1920s, European traditional maritime powers, along with American maritime trade unions, sought to lambaste and outlaw it.

Indeed, these two developing countries were well and truly castigated by their critics. In a bid to prove that the nascent registries were a sham, their accusers denounced them in the papers; they even pursued and attacked them vehemently in courts of law and at international conferences.

The unions and their supporters picketed and called on the US government to close the loopholes that allowed American ship owners to escape from US labour wages and conditions. The unions were determined to demonstrate in courts and in public that this new type of registry was not only bad for American seafarers’ jobs but was also terrible for the country’s marine and economic powers.

But Liberia and Panama, and later Honduras, along with their American ship owners, won every case, even the ones that went to the American Supreme Court and the International Court of Justice. By the end of 1963, they had overcome all legal challenges. All of this served as a shot in the arm for these developing countries and those who wished to do business with them.

The unions were later joined by European shipping unions and by the International Transport worker Federation (ITF) – and the walkouts and the confrontations with the police and other dockworkers continued unabated for many more years.

Although this pushback against open registry shipping has dampened somewhat, many adherents of closed registry shipping still disparage the strategic business model of what they continue to fallaciously refer to “flag of convenience (FOC)” shipping, while it has become virtually impossible to differentiate one type registry from another.

There are two primary catalysts for this turn of events.

With legal power drawn from international agreements (i.e., IMO accords), a littoral state can board, inspect, and where applicable, confine a vessel that anchors at its port. This mechanism, referred to as Port State Control (PSC), makes it possible for an independent-third-party, rather than the flag state, to verify whether a ship is seaworthy or if it is in violation of an international shipping protocol, say, the discharge of harmful substances.

PSC confinement can be seen as the first line of defense against tawdry shipping, as coastal states use their sovereign jurisdiction over their territorial waters to inhibit substandard vessels from operating internationally. Often, non-compliance vessels are compelled to fix their shortcomings before returning to sea.

Indeed, making a ship seaworthy at a foreign port can be problematic - something that most registries and shipping companies want to avoid, for detention increases overhead costs, gives rise to significant vessel delays and penalties, and the “black-listing” of a ship and its flag state. 

Therefore, as would be expected, ship owners of renounced companies do not like to be routinely singled out for port state inspections just because they fly a particular flag. Therefore, they gravitate toward open registries with good Port State Control ‘scorecards’. 

This, in turn, pressurizes a key open registry like the Liberian Registry to do away with substandard ships (poorly performing, shipping companies), thereby improving the lot of the Liberian Maritime Authority and the standing of the entire shipping industry

The port state control system is further enhanced by regional ports worldwide allying themselves into memoranda of understanding (MOUs) in an attempt to have a system with better coordination, wider reach and ‘sharper teeth’.

MOUs around the world (for example, the Tokyo MoU, the Caribbean MoU and the Black Sea MoU) coordinate their activities to make certain that vessels calling at their ports abide with internationally excepted shipping regulations. The ultimate goal of all MoUs is to identify and eradicate all substandard sea-going vessels from their regions.

 Increasingly, in recent years, statistics from these MoUs, commonly referred to as ‘IMO lists’, show that the performance of open registries is no worse than those of closed registries. The current IMO Flag Performance White List (as of July 2018) and the Paris MoU Annual Report (White, Gray and Black lists of 2018) reflect this reality.

Unquestionably, published performance statistics authenticate that open registries like Liberia and Bahamas have some of the best port-state- report cards, often better than some traditional maritime countries.

Besides, it is being increasingly acknowledged that the differentiation between the two types of registries is purely academic - plainly meaningless. Indeed, gone are the days when the pejorative, disparaging and censorious terms “flag of convenience” had some weight. In fact, an open registry like the Liberian Registry has gone past many a traditional maritime state – and has become what could rightly and fittingly be termed a “flag of compliance”.

In a nutshell, the PSC system has helped what used to be termed “flag of convenience” registries raise their standards and attract serious, law-abiding shipping companies – this is particularly true for the Liberian Registry, a registry that was at one period an industrial basket-case – a kingpin of the worst problems in the shipping industry.

 These days, the country’s vessels are among the best, largely because of the mechanism of the PSC system. This state of affairs is reflected in its excellent port-state detention rates in recent years, an achievement that some traditional nations find hard to achieve.

Liberia, the flag state that was at one time referred to as the “poor man of the shipping world” and the “rusty bucket” of the industry in the 1960s and 70s, has also been helped by a unique satellite-based program it developed to equip and help trading vessels that fly its flags adhere to all Port State Control rules and regulations, thereby avoiding the detention of Liberian-flagged ships, and subsequently contributing to the West African country being named on all PSC Whitelist in recent years. The concerned satellite-based technology is aptly called the Compliance Assistance Program (CPA).

As intimated above, this abridged article aims to show how the regulatory powers of the PSC system have helped transmute what used to be spitefully and loosely referred to as “flag of convenience shipping” into today’s exemplar shipping registry.

But there is another catalyst, which has, perhaps in equal measure, helped to shape and transform what was once misleadingly and captiously termed FOC into what is perhaps today the most innovative and efficient mode of shipping. And just as any good old regional port state control facility, this international, non-governmental mechanism commonly referred to as a classification society, has become an indispensable organization in the ocean industry. Its roles and impacts will be discussed in the next edition of this paper. It is not to be missed. 

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Last modified on Friday, 27 November 2020 11:58
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